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SamSung HDD Hard Disk Drive Transfer to SeaGate: A Strategic Move or a Mistake?



Seagate developed the first 5.25-inch hard disk drive (HDD), the 5-megabyte ST-506, in 1980. They were a major supplier in the microcomputer market during the 1980s, especially after the introduction of the IBM XT in 1983. Much of their growth has come through their acquisition of competitors. In 1989, Seagate acquired Control Data Corporation's Imprimis division, the makers of CDC's HDD products. Seagate acquired Conner Peripherals in 1996, Maxtor in 2006, and Samsung's HDD business in 2011. Today, Seagate, along with its competitor Western Digital, dominates the HDD market.




SamSung HDD Hard Disk Drive Sold to SeaGate



Seagate Technology (then called Shugart Technology) was incorporated on November 1, 1978, and commenced operations with co-founders Al Shugart, Tom Mitchell, Doug Mahon, Finis Conner, and Syed Iftikar in October 1979.[3] The company came into being when Conner approached Shugart with the idea of starting a new company to develop 5.25-inch HDDs which Conner predicted would be a coming economic boom in the disk drive market.[4] The name was changed to Seagate Technology to avoid a lawsuit from Xerox's subsidiary Shugart Associates (also founded by Shugart).[5]


The company's first product, the ST-506, with a storage capacity of 5 megabytes (MB), was released in 1980. It was the first hard disk to fit the 5.25-inch form factor of the Shugart mini-floppy drive. It used a Modified Frequency Modulation (MFM) encoding[6][7] and was later released in a 10 MB version, the ST-412. With this, Seagate secured a contract as a major OEM supplier for the IBM XT, IBM's first personal computer to contain a hard disk.[citation needed] The large volumes of units sold to IBM fueled Seagate's early growth. In their first year, Seagate shipped $10 million worth of units to consumers. By 1983, the company shipped over 200,000 units for revenues of $110 million.[4]


In 1983, Al Shugart was replaced as president by then chief operating officer, Tom Mitchell, in order to move forward with corporate restructuring in the face of a changing market. Shugart continued to oversee corporate planning. By this point, the company had a 45% market share of the single-user hard drive market, with IBM purchasing 60% of the total business Seagate was doing at the time.[4]


In September 1991, Tom Mitchell resigned as president under pressure from the board of directors, with Al Shugart reassuming presidency of the company. Shugart refocused the company on its more lucrative markets, and on mainframe drives instead of external drives. He also pulled away from outsourcing component production overseas. This allowed Seagate to better keep up with demand for PCs, which increased extremely rapidly in 1993 across the market.[10] This included a domestic partnership with Corning Inc., which began using a new glass-ceramic compound to manufacture disk substrates.[11] In 1991, Seagate also introduced the Barracuda HDD, the industry's first hard disk with a 7,200 RPM spindle speed.[12]


In May 1993, Seagate became the first company to cumulatively ship 50 million HDDs over its firm's history.[13] The following year, Seagate Technology Inc moved from the Nasdaq stock exchange to the New York Stock Exchange, trading under the ticker symbol SEG. Upon leaving, the company was the 17th-largest company in terms of trading volume on the Nasdaq exchange.[14] In 1996, Seagate merged with Conner Peripherals to form the world's largest independent hard-drive manufacturer.[15][16] Following the merger, the company began a system of consolidating the components and production methods within its production chain of factories in order to streamline how products were built between plants.[17]


In 1996, Seagate introduced the industry's first hard disk with a 10,000 RPM spindle speed, the Cheetah 4LP. By 2000, this product increased to a speed of 15,000 RPM with the release of the Cheetah 15X.[21] In May 1997, the High Court of Justice in England awarded Amstrad PLC $93 million in a lawsuit over reportedly faulty disk drives Seagate sold to Amstrad, a British manufacturer and marketer of personal computers.[22] That year, Seagate also introduced the first Fibre Channel interface hard drive.[23][24]


Luczo joined Seagate Technology in October 1993 as Senior Vice President of Corporate Development.[27] In March 1995, he was appointed Executive Vice President of Corporate Development and chief operating officer of Seagate Software Holdings. In 1996, Luczo led the Seagate acquisition of Conner Peripherals, creating the world's largest disk drive manufacturer and completing the company's strategy of vertical integration and ownership of key disk drive components. In September 1997, he was promoted to the positions of President and Chief Operating Officer.


In 1998, the company's Seagate Research facility was also established in Pittsburgh,[29] a $30 million investment that focused on future technologies and prototypes. Technology developed by the facility would include devices like the hard drive disk for Microsoft's first Xbox.[30]


In 2000, Seagate became a private company again. Luczo led a management buyout of Seagate, believing that Seagate needed to make significant capital investments to achieve its goals. He decided to turn the company private, since disk drive producers had a hard time obtaining capital for long-term projects.[33] The company was incorporated in Grand Cayman and stayed private until it re-entered the public market in 2002.[34]


In early November 1999, Luczo met with representatives of Silver Lake Partners to discuss a major restructuring of Seagate. After two failed attempts to increase Seagate's stock price and unlock its value from Veritas, Seagate's board of directors authorized Luczo to seek advice from Morgan Stanley in October 1999. In early November 1999, Morgan Stanley arranged a meeting between Seagate executives and representatives of Silver Lake Partners.[33] On November 22, 2000, Seagate management, Veritas Software, and an investor group led by Silver Lake closed a complex deal that privatized Seagate. At the time, this was the largest buyout ever of a technology company.[35][36] The total deal, worth about $20 billion, included the sale of its disk-drive operations for $2 billion to an investor group led by Silver Lake Partners. The goal of the deal was to unlock the value of the 33% ownership stake Seagate had in Veritas, which had put the value of Seagate's stock at around $33 billion even though its market cap was only $15 billion.[31]


In 2003, Seagate re-entered the HDD market for notebook computers and provided the 1-inch hard drives for the first iPods. This led to a trend of digital devices being created with progressively more and more memory, especially in cameras and music devices.[38] In September 2004, The New York Times called Seagate "the nation's top maker of hard drives used to store data in computers", following the company forecasting its quarterly revenue above Wall Street estimates.[39]


At the beginning of 2006, Forbes magazine named Seagate its Company of the Year as the best managed company in the United States. Forbes wrote that, "Seagate is riding the world's gadget boom. Its 1-inch drives are the archives for cameras and MP3 players." It also credited Seagate as being the company that "sparked the personal computer revolution 25 years ago with the first 5.25-inch hard drive for the PC".[40]


In 2012, Seagate continued to raise its dividend and repurchased nearly 30% of the company's outstanding shares. In the fiscal year ending June 2012, Seagate had achieved record revenues, record gross margins, record profits, and regained its position as the largest disc drive manufacturer. Its market value had increased to over $14 billion. In March 2012, Seagate demonstrated the first 1 TB/square inch density hard drive, with the possibility of scaling up to 60 TB by 2030.[51]


In January 2017, Seagate announced the shutdown of one of its largest HDD assembly plants, located in Suzhou, China.[55] The plant became part of Seagate after Maxtor's acquisition in 2006; Maxtor started producing hard drives in Suzhou in 2004.


On January 21, 2014, numerous tech articles around the globe published findings from the cloud storage provider Backblaze that Seagate hard disks are least reliable among prominent hard disk manufacturers.[86][87][88] However, the Backblaze tests have been criticized for having a flawed methodology that has inconsistent environment variables, such as ambient temperatures, vibration, and disk usage.[89][90] In addition, Backblaze's statistics show that the vast majority of their installed drives are manufactured by Seagate, and Backblaze editor Andy Klein has noted "that a large number of new Seagate drives being deployed could be statistically responsible" for failure rate data in their specific datacenter population.[91] In the broader landscape, Seagate enterprise drives were named "most reliable" for seven years running in the IT Brand Pulse survey of top IT professionals, and cited as the leader for the previous two years in every measured category: reliability, performance, innovation, price, and service and support.[92] In 2019, Backblaze released updated statistics which reported that Seagate drives had the most failures in Q2 2019, whereas its best-rated drives were made by Toshiba.[93]


In October 2021, a report by U.S. Senate Republicans claimed that Seagate violated Export Administration Regulations by selling parts and components to Huawei following U.S. sanctions against the Chinese telecommunications company.[94] The company received another letter in August 2022 from the U.S. Commerce Department's Bureau of Industry and Security for allegedly violating export sanctions to sell Huawei hard drives. Seagate denied any violations claiming that its foreign-made hard drives are not subject to the restriction since the disks and the equipment to make them were not a direct product of any American semiconductor technology or software.[95][68] 2ff7e9595c


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